Woodland Hotels Incorporated operates four resorts in the heavily wooded areas of northern California. The resorts are named after the predominant trees at the resort: Pine Valley, Oak Glen, Mimosa, and Birch Glen. Woodland allocates its central office costs to each of the four resorts according to the annual revenue the resort generates. For the current year, the central office costs (000s omitted) were as follows: Front office personnel (desk, clerks, etc.) $ 8,600
Administrative and executive salaries Interest on resort purchase 4,600
Advertising 3,600
Housekeeping 900
Depreciation on reservations computer 2,600
Room maintenance 380
Carpet-cleaning contract 860
Contract to repaint rooms 62 460
Costs to be allocated $ 22,062
Pine Valley Oak Glen Mimosa Birch Glen Total
Revenue (000s) $ 5,950 8,595 $ 8,917 7,750 31,212
Square feet 56,075 77,199 42,374 84,264 259,912
Rooms) 92 128 72 180 472
Assets (000s) 92,945 137,345 72,955 58,099 $361,344
Required:
1. Based on annual revenue, what amount of the central office costs are allocated to each resort?
Pine Valley Oak Glen Mimosa Birch Glen Total
Allocated cost 4,206 $ 6,075 6,303 $ 5,478 $ 22,062
2) Suppose that the current method were replaced with a system of four separate cost pools with costs collected in the four pools allocated on the basis of revenues, assets invested in each resort, square footage, and number of rooms, respectively. Which costs should be collected in each of the four pools?
3) Using the cost pool system in requirement 2, how much of the central office costs would be allocated to each resort?